e425
Filed by FirstEnergy Corp.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-6
of the Securities Exchange Act of 1934, as amended
Subject Company: Allegheny Energy, Inc.
Commission File No: 333-165640
On August 26, 2010, FirstEnergy Corp. issued the following newsletter to its employees relating to
the proposed merger with Allegheny Energy, Inc.
To FirstEnergy and Allegheny Energy employees,
Six months into the process, we continue to
believe that this merger will benefit our employees,
customers and shareholders. While this merger will create a
larger company, we anticipate the real benefit will be that
our combination will create a strategic advantage, providing
a platform for sustained, higher-level performance as well
as additional opportunities for employees. Our two companies
might look similar in terms of business models, but the
whole will be greater than the sum of the parts.
In the early stages of any proposed merger, its
difficult for employees to see the benefits because we all
are busier than ever running the respective businesses,
helping with information requests to support the regulatory
process, learning about both companies through presentations
and other materials and trying to assess what the future
holds. But the anticipated operational benefits,
particularly in our generation and competitive businesses,
are real, and so are the advantages our size and scale will
provide in purchasing materials and in operating other
aspects of our business.
And, while there is duplication in certain employee
positions as there always is in any merger we also
expect new opportunities to open or be created that can
offer many employees broader development and career
potential.
One way positions will open is through natural
attrition and the reduced hiring that has been in effect at
both companies, which will result in the need to fill many
of these positions following the merger.
An example of an area where we expect new opportunities is
FirstEnergy Solutions (FES), the unregulated business unit
that is responsible for
asset utilization dispatching the competitive generating
units into the market and implementing FirstEnergys
retail sales strategy.
FirstEnergy Solutions already has a robust organization
almost 150 people that sells electricity in numerous
states. Regardless of the merger, FES is expected to grow as
new products and markets develop. Through the merger, it
will have substantially more products to sell and much
broader markets to engage.
For FES to be successful in engaging more markets, the
organization will need employees with experience in energy
sales, billing, auditing, customer support and back-office
skills like business analytics and accounting. FES also will
require employees in Commodity Operations with experience in
hedging and wholesale and structured transactions.
The plan is to wait until the merger is completed to
fully staff the FES organization so we can fill as many of
the positions with current Allegheny employees as possible.
This way, we will have employees who understand our industry
and have the skills we need in the new organization.
As for the state filings made by our utility companies,
we want to clarify a point about utility operations jobs
that may have been confusing. Our jobs commitment in the
Pennsylvania, Maryland and West Virginia filings stated
there will be no net reductions due to involuntary
Continued on page 2
In this issue
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Merger Work Progresses |
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Merger Process Schedule |
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Questions and Answers |
Letter from Tony Alexander and Paul Evanson (Continued from cover page)
attrition as a result of the merger integration process
in either the employment levels of the FirstEnergy Utilities
or in the employment levels of employees of AESC (Allegheny
Energy Service Company) who are assigned to positions in the
Allegheny Power Utilities comparable to their counterparts
who are employed by the FirstEnergy Utilities.
Generally, FirstEnergy employees who work at one of the utility
companies are employed by that utility company for
example, lineworkers with the Pennsylvania Electric Company
(Penelec) are employees of Penelec. By contrast, in the
Allegheny organization, lineworkers with the West Penn Power
Company are actually employees of Allegheny Energy Service
Corporation. The commitment in our state regulatory filings
applies to both.
Remember, weve already announced that we expect very
little, if any, impact on Alleghenys physical work-force
employment levels which includes employees in the
utilities and generating plants based on the information
we have now.
Understandably, over the next several months, there
will be many questions about jobs, work locations, benefits
and numerous other merger-related topics. We encourage you
to submit your questions to the Merger News and we will
answer those we can. Please keep in mind, though, that while
all of the Merger Integration Teams are well under way with
their work, further work is necessary as they focus on how
to best combine operations to improve performance at the new
company.
We have not yet finalized integration plans and
many of the decisions that affect all employees, like
benefits, will not be made for several months. (For further
information on the integration work schedule, please see the
Merger Work Progresses article below.) As the merger process
continues, well update you through this publication.
Thank you for your ongoing support. Were confident
that building a stronger company, better positioned for
success in the future, will provide many benefits and
opportunities for employees.
Sincerely,
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Tony Alexander
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Paul Evanson |
President and CEO
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Chairman, President and CEO |
FirstEnergy
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Allegheny Energy |
Merger Work Progresses
The Regulatory and Integration Teams are meeting
significant milestones as the merger work continues. While
some Integration Teams work to complete preliminary studies
identifying areas where potential value could be derived in
the combined company, some of their preliminary information
is being shared with investors.
Last week, FirstEnergy President and CEO Tony
Alexander, and Executive Vice President and President,
FirstEnergy Generation Gary Leidich, briefed investors,
analysts and shareholder advisory firms about the areas the
teams are studying, using examples from the teams to
illustrate the work and potential value that could be
created by the merger.
One example of value creation discussed is from the
Generation/Environmental teams work. As part of its review
of preliminary opportunities, the Generation/ Environmental
team has identified potential additional megawatt-hours
that can be generated from our respective plants by
reducing the Equivalent Forced Outage Rate (EFOR) the
percentage of time a generating unit is not available
versus the amount of time the unit is requested to be
online. Over the past few years, FirstEnergys
supercritical plants have averaged 4- to 5-percent EFOR and
Allegheny Energys supercritical fleet has run several
percentage points higher during that same period. Achieving
a 4-percent EFOR across all of the combined companys
supercritical units would significantly increase the
megawatt-hours we could sell; the same holds true for the
subcritical units. Depending on the market price, this
could provide a revenue opportunity.
Continued on page 3
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Merger News
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August 26, 2010 |
Work Progresses (Continued from page 2)
Another opportunity to create value for the combined
company would be in controlling inventories. Each company
currently needs a significant amount of inventory to
support their respective systems. After the merger is
completed and certain systems have been integrated, the
combined companys size and scale also should allow us to
negotiate better discounts on materials and services,
such as vegetation management, vehicle leasing and buying
parts and supplies for the business units.
Additional opportunities can be achieved as we move
to a single customer information system, combine other
applications and use a single enterprise resource
planning system across the organization.
Other
opportunities such as having one shareholders
meeting and one annual report may seem small, but add
up to significant savings and efficiencies.
For more information on areas that might benefit
from applying best practices or from the scale and scope
of the new organization, please see the
presentation used at the investor sessions,
available at:
www.firstenergycorp.com/alleghenymerger.
Regulatory Update
As part of the regulatory process, weve filed
applications with the Federal Energy Regulatory
Commission and the state commissions in Pennsylvania,
Maryland, West Virginia and Virginia. Procedural
schedules have been established for each state. The first
public hearings and the only ones scheduled in
Pennsylvania were held by the Pennsylvania Public
Utility Commission on Aug. 3, in Greensburg, Pa., where
Allegheny Energys headquarters is located. At the first
meeting, 11 witnesses testified and at the second
session, 12 witnesses provided sworn testimony.
Various groups have begun expressing public support
for the merger. Groups that have already indicated
support include the International Brotherhood of
Electrical Workers (IBEW); the Utility Workers Union of
America (UWUA); the Butler, Pa. County Economic
Development Corp.; Johnstown, Pa. Chamber of Commerce;
Pa. Economic Development Association; City of Frederick,
Md. Mayor and Board of Aldermen and the Marion County
Commission (Fairmont, West Va.), among others.
Our respective legal teams are addressing the Department
of Justices request for more information related to our
Hart-Scott-Rodino (HSR) filings. We believe that we
remain on track to complete the merger during the first
half of 2011.
Merger Teams Continuing Their Work
The Merger Integration Teams will continue to work on
their preliminary analyses. Between now and the end of
the year, the teams will finalize their preliminary
reports. These reports will include the teams
recommendations and are scheduled to be presented to
executive management at the end of the year.
Its
important for everyone to understand our schedule and
process, said Steering Committee Chair and FirstEnergy
Executive Vice President and President, FirstEnergy
Generation Gary Leidich.
The amount of work our teams have completed is
significant, but there are still many months to go
before we have final decisions to share with all
employees. As stated on the Merger Process Schedule (see
page 4), many decisions, such as final staffing levels,
employee benefits and organizational design will not be
finalized until much later in the process.
Several
teams, including Corporate Services, Human Resources,
Transmission and Finance are drafting preliminary
reports and may soon temporarily break from their
team activities. Information Technology is drafting an
extensive plan to support critical business applications
for Day One and beyond. Other teams preparing
preliminary reports include Utility Operations, Fuels,
Generation/Environmental and Supply Chain.
After the executive team reviews the teams
reports, they likely will have questions and other
feedback that will result in additional work for many
if not all the teams, said Chief Operating
Officer, Allegheny Energy Curtis Davis. For the most
part, we wont have any answers until we receive signoff
on the final recommendations. Then, we will share with
employees information about the plans.
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Merger News
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August 26, 2010 |
Note: Timeline not to scale.
Keeping You Updated with Merger News
The Merger News is designed to keep FirstEnergy and Allegheny Energy employees aware of
merger-related activities and progress.
Hearing from you will help us answer your questions in future Merger News editions, within the
legal restrictions we have on sharing certain information and as it becomes available. If you have
questions or comments related to the proposed merger, send them to: merger@firstenergycorp.com or
merger@alleghenyenergy.com.
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Merger News
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August 26, 2010 |
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Questions and Answers
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Q FirstEnergy recently announced operational changes at its smaller, coal-fired plants along Lake
Erie. Should we expect these changes to affect Allegheny Energys subcritical plants?
A FirstEnergys decision is not related to the merger with Allegheny and applies only to
FirstEnergys fleet.
To summarize the FirstEnergy operational changes, theyll involve smaller, coal-fired plants: Bay
Shore units 2-4; Eastlake plant units 1-4; and the single units at the Lake Shore and Ashtabula
plants. Starting this September, FirstEnergy plans to operate these units with a minimum three-day
notice from the Midwest Independent System Operator (MISO) and in response to customer demand, such
as during summer and winter extreme weather conditions, when it is anticipated the units will
dispatch more frequently. Starting in September 2011 and subject to coordination with the Regional
Transmission Organization PJM and its market monitor, the Bay Shore and Eastlake units will be
available only in the winter and summer, and the Ashtabula and Lake Shore plants will be idled
temporarily. This schedule will last about 18 months while the situation is assessed further.
These decisions are the result of continued slow economic conditions, low demand for electricity
and uncertainty related to proposed new federal environmental regulations. Not all employees at
these plants are affected and those who are may be reassigned to other FirstEnergy facilities.
Last year, again due to the economic slowdown, FirstEnergy reassigned some employees from its
fossil-fueled plants to other facilities, such as nuclear plants.
Other utility companies, such as American Electric Power, Progress Energy and Xcel Energy,
also have announced changes in the operations of older, smaller coal-fired units for economic and
environmental reasons.
The operational adjustments FirstEnergy announced will enable the Company to better match
generation with expected customer loads and maintain service reliability. The changes give the
Company time to develop plans to keep its skilled workforce productive and help the Company remain
flexible to make decisions about how to most effectively manage these units.
From an Allegheny perspective, there are no current plans to change the operation of any
subcritical units. Alleghenys subcritical plants will continue to undergo regular business review,
which includes monitoring key business drivers such as energy market prices, environmental
regulations and capacity auction results. As with FirstEnergy, environmental regulations are a key
factor in any future decisions. At times, when market conditions have warranted a change in plant
operations, Allegheny also has redeployed affected employees, like FirstEnergy plans to do.
Q Can you tell me where FirstEnergy has satellite corporate offices?
A FirstEnergy has several regional offices, many of which provide support for its operating
companies. Corporate offices outside of the downtown Akron, Ohio, headquarters are located in:
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Red Bank, New Jersey |
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Reading, Pennsylvania |
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Erie, Pennsylvania |
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Johnstown, Pennsylvania |
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Brecksville, Ohio |
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Toledo, Ohio |
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West Akron Campus, Akron, Ohio |
This list does not include all regional offices, such as the Fairlawn, Ohio, Customer Contact
Center.
Continued on page 6
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Merger News
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August 26, 2010 |
Questions and Answers (Continued from page 5)
Q Is there anything that FirstEnergy is doing to understand the employee culture from the merged
companies?
A Yes, the integration process has a component that directly addresses understanding the cultures
in each company. A cultural assessment is in progress, supported by a team of Allegheny Energy and
FirstEnergy employees, to help identify key differences and similarities between the two companies.
The similarities and differences are being identified through focus group sessions with Integration
Team member participants and other employee groups, as well as by studying existing employee
surveys. Understanding the similarities and differences early will help the workgroups better
prepare for integrating the two companies on Day One and beyond.
Q Does FirstEnergy have unregulated and regulated generation?
A All of FirstEnergys generation fleet is unregulated with the exception of the Yards Creek Pumped
Storage Project, a 400-megawatt hydroelectric project located in Warren County, New Jersey. Jersey
Central Power & Light (JCP&L), FirstEnergys New Jersey operating company, owns an undivided
50-percent interest in the project, and JCP&L operates the project. All other FirstEnergy plants
are owned, leased and/or operated by either FirstEnergy Nuclear Operating Company or FirstEnergy
Generation Corp.
INFORMATION CONCERNING FORWARD-LOOKING STATEMENTS
In addition to historical information, this newsletter may contain a number of forward-looking
statements as defined in the Private Securities Litigation Reform Act of 1995. Words such as
anticipate, expect, project, intend, plan, believe, and words and terms of similar substance used
in connection with any discussion of future plans, actions, or events identify forward-looking
statements. Forward-looking statements relating to the proposed merger include, but are not limited
to: statements about the benefits of the proposed merger involving FirstEnergy and Allegheny
Energy, including future financial and operating results; FirstEnergys and Allegheny Energys
plans, objectives, expectations and intentions; the expected timing of completion of the
transaction; and other statements relating to the merger that are not historical facts.
Forward-looking statements involve estimates, expectations and projections and, as a result, are
subject to risks and uncertainties. There can be no assurance that actual results will not
materially differ from expectations. Important factors could cause actual results to differ
materially from those indicated by such forward-looking statements. With respect to the proposed
merger, these factors include, but are not limited to: risks and uncertainties relating to the
ability to obtain the requisite FirstEnergy and Allegheny Energy shareholder approvals; the risk
that FirstEnergy or Allegheny Energy may be unable to obtain governmental and regulatory approvals
required for the merger, or required governmental and regulatory approvals may delay the merger or
result in the imposition of conditions that could reduce the anticipated benefits from the merger
or cause the parties to abandon the merger; the risk that a condition to closing of the merger may
not be satisfied; the length of time necessary to consummate the proposed merger; the risk that the
businesses will not be integrated successfully; the risk that the cost savings and any other
synergies from the transaction may not be fully realized or may take longer to realize than
expected; disruption from the transaction making it more difficult to maintain relationships with
customers, employees or suppliers; the diversion of management time on merger-related issues; the
effect of future regulatory or legislative actions on the companies; and the risk that the credit
ratings of the combined company or its subsidiaries may be different from what the companies
expect. These risks, as well as other risks associated with the merger, are more fully discussed in
the joint proxy statement/prospectus that is included in the Registration Statement on Form S-4
(Registration No. 333-165640) that was filed by FirstEnergy with the SEC in connection with the
merger. Additional risks and uncertainties are identified and discussed in FirstEnergys and
Allegheny Energys reports filed with the SEC and available at the SECs website at www.sec.gov.
Forward-looking statements included in this document speak only as of the date of this document.
Neither FirstEnergy nor Allegheny Energy undertakes any obligation to update its forward-looking
statements to reflect events or circumstances after the date of this document.
ADDITIONAL INFORMATION AND WHERE TO FIND IT
In connection with the proposed merger, FirstEnergy filed a Registration Statement on Form S-4
(Registration No. 333-165640) with the SEC that includes a joint proxy statement of FirstEnergy and
Allegheny Energy and that also constitutes a prospectus of FirstEnergy. FirstEnergy and Allegheny
Energy urge investors and shareholders to read the joint proxy statement/prospectus regarding the
proposed merger, as well as other documents filed with the SEC, because they contain important
information. You may obtain copies of all documents filed with the SEC regarding this proposed
transaction, free of charge, at the SECs website (www.sec.gov). You may also obtain these
documents, free of charge, from FirstEnergys website (www.firstenergycorp.com) under the tab
Investors and then under the heading Financial Information and then under the item SEC
Filings. You may also obtain these documents, free of charge, from Allegheny Energys website
(www.alleghenyenergy.com) under the tab Investors and then under the heading SEC Filings.
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August 26, 2010 |